The Bull pen:
Nintendo's long term earnings picture is positive. Hardware sales continue to be exceptional as the company cannot produce enough to meet demand. Anecdotally, many consumers prefer to wait for the Wii rather then purchase the PS3 or XBox. The DS handheld continues to sell well internationally as well as in Japan. More importantly, Nintendo produces many of the games on its consoles, so it's profit potential per a console is higher then Sony's. Since both the Wii and the DS have appeal to "non gamers" further growth seems likely.
The Bear Den:
Although Nintendo recently revised it's net income estimates upwards, the company does acknowledge the significant risks of a rising Yen relative to the dollar (see the link below to their Q/A on the latest earnings). Also, Note that the ADR is not cheap. According to ADR.COM, NTDOY's 2008 estimated EPS is USD $1.35.
Assuming a discount rate of 10%, a 40% growth rate year over year for five years and zero growth thereafter (tech. can change a lot in five years), then the present value of NDOY would be 59-60 dollars a share. Nintendo may only selling at a 10% discount to it's intrinsic value.
Conclusion: Nintendo is too exciting a story to miss out on. However, currency concerns are valid, and therefore only a small position is warranted at the present price of 55.20 ( 2.5% of my model portfolio).
REFERENCES:
1. An article: http://techon.nikkeibp.co.jp/english/NEWS_EN/20080128/146363/...
2. Nintendo results for the nine month period ending Dec. 31st 2007: http://www.nintendo.co.jp/ir/pdf/2008/080124e.pdf
3. And the Q. and A. section (please note the section on negative the impact of the stronger Yen): http://www.nintendo.co.jp/ir/en/library/events/080125qa/index...
4. The main I.R. site in English: http://www.nintendo.co.jp/ir/en/index.html